News

1st January 2018

“Strengthening price inflation in established market, but positive impact of ‘help to buy’ notable in new homes market”

Statement by Marian Finnegan, Chief Economist, Sherry FitzGerald Group Monday, January 1st, 2018

Sherry FitzGerald, Ireland’s largest estate agents, announced today January 1st, that following growth of 1.5% in the fourth quarter, the average value of residential property in Ireland had risen by 8.4% over the course of 2017. This compares to an increase of 5.2% recorded in 2016. 

The average value in Dublin rose by 1.5% in the fourth quarter, bringing cumulative growth for 2017 to 8.8%. This is a notable increase on the 3.7% recorded in 2016.

If one excluded Dublin from the figures, the rest of Ireland saw growth of 1.5% in the quarter and 7.9% in the full calendar year, marginally stronger than the 7.3% growth rate recorded for 2016.

The regional centres of Galway, Cork and Limerick also experienced substantial price growth of 8.4%, 7.3% and 7.4% respectively over the twelve-month period.

Commenting on the results; Marian Finnegan, Chief Economist, Sherry FitzGerald Group said; “A strengthening economy, strong employment growth and notable demographic pressures have all led to significant upward pressure on the demand for housing. This has resulted in a period of heightened price growth. This is most notable in the established housing markets of Dublin, Cork, Limerick and Galway, where the supply side pressures are most apparent. That said, it is worth noting that the average value of new home dwellings sold in the first nine months rose by a modest 1% in Dublin, illustrating the positive impact of the ‘help to buy’ scheme on the new homes market.”

The latest available data from the Property Price Register reveals that just over 37,500 transactions were recorded during the first nine months of 2017. Due to the time lag in logging data to the PPR, the first nine months is the most accurate data available. Excluding multi-family/portfolio sales, the figure falls to approximately 35,600, representing an increase of 9% on the same period in 2016. In Dublin, the volume of sales grew by 10%, with approximately 11,400 transactions taking place in the first three quarters of the year.

On a positive note, the volume of new dwelling transactions recorded in the Property Price Register during the first nine months was up 27%, when compared to the same period in 2016.

The average value of all new dwellings which transacted during the nine-month period was 10% higher, than the same period in 2016.

Dublin accounted for 41% of total new dwelling sales, with the volume of sales growing by 36% in the capital. Average values in Dublin grew more a modest 1% over the period.

According to the latest mortgage market data by the Banking and Payments Federation Ireland, mortgage activity continues to intensify, while the ratio of cash buyers in the market is in decline. Comparing the Property Price Register data to the number of mortgages drawn down, suggests that 42% of single property transactions did not have a mortgage attached to the transaction during the first nine months of the year. This compares to 47% in the same period in 2016. 

Owner occupier levels remained strong during 2017 accounting for 72% of all purchasers. First-time buyers represented half of all owner occupiers.

An analysis of the profile of vendors and purchasers, who sold their property through Sherry FitzGerald in 2017, reveals a similar pattern to recent years where the buy to let market has seen an outflow of investors. During 2017, 33% of Sherry FitzGerald vendors were selling their investment properties, while investors entering the market represented only 20% of purchasers in the established housing market. 

In conclusion Ms Finnegan noted; “The uplift in activity in the new homes and mortgage markets are positive endorsements of the Governments ‘help to buy’ scheme and the Central Banks relaxation of the Macro prudential rules in 2016. That said, more measures aimed at rapidly increasing supply in all locations are required, if we are to reduce the pace of price inflation. 

The success of the help to buy scheme in encouraging the development of starter homes in the market should act as a positive endorsement of how targeted measures can assist in the recovery of a market. Further such measures aimed at encouraging investors to increase the supply of buy to let properties in the urban centres are now urgently required, to facilitate a stabilisation in rental inflation.

Looking to the year ahead, other things being equal, it seems likely that the market will continue to experience above trend price growth with current indications suggesting that prices will increase by 6-8% in the established housing markets.”

 

ENDS

For any further information, please contact:

Jill O'Neill

Director of Communication

Sherry FitzGerald Group

jill.oneill@sherryfitz.ie   

Ph: 01 237 6500 / 086 252 3277                                                                                    

Marian Finnegan

Chief Economist

Sherry FitzGerald Group

marian.finnegan@sherryfitz.ie

Ph: 01 237 6341 / 086 814 8251

Note to Editors:

(1) Founded in 1982, Sherry FitzGerald has grown to become Ireland’s largest firm of estate agents with over 90 owned and franchised branches throughout Ireland.

(2) The Sherry FitzGerald barometer of second-hand house prices is the longest established index of price performance in the Irish residential market. Originally established in 1992 the barometer provides a quarterly analysis of price trends in the Irish and Dublin second-hand residential market. 

(3) The basket of properties in the barometer of second-hand houses was expanded from approximately 1,400 units to over 1,600 units at the start of 2017.